Why is procurement a strategic business function?

Building a purchasing strategy is an essential step in the life of a company. The purchasing function is a growth lever that serves to improve your company’s performance. When a company starts to grow, its managers are obliged to rethink purchasing management. After all, it is crucial to the smooth running of the company. Why is purchasing a strategic function for any company, whatever its size? Find out why in this article.

Improved company performance

Although the purchasing function has long been overlooked, it is now at the heart of all forward-looking corporate policies. The different economic contexts have made company managers aware of its role in defining new objectives.

  • Purchasing policy is no longer just about improving purchasing management, or simply providing logistical support. It is more than that. It provides solutions for the company’s development. Purchasing managers become the true architects of success. They are no longer relegated to administrative management.
  • Purchasing departments are given greater responsibility andautonomy. They are now fully involved in the management of the company. As a result, they not only have a real understanding of the market, but also of all the latest developments in their sector. It becomes a real driver of innovation, but also a carrier of solutions adapted to the needs of the company and its internal customers.

The purchasing manager is also involved in determining the company’s needs, distinguishing between products directly linked to production and administrative material or non-production purchases.

Improving supplier relations

Purchasing department managers must be able to adapt to imponderables. They must also master the logistical function of suppliers, such as their ability to deliver goods on time, or even at the last minute. This will facilitate the company’s relationship with its suppliers.

The purchasing department identifies the best suppliers. To do this, it is important not only to consider those who offer the best price, but to take into account several levers. Working with the best suppliers on the market enables the company to take advantage of new techniques and technologies for its activities, as they share the risk and profits with the company. This notion of sharing ensures a good relationship with suppliers and business management.

The supplier relationship must be privileged, equitable and reciprocal. Certain suppliers should be given priority when placing an order, particularly if there is a contract or a procurement contract with the public authorities. If a supplier is out of stock, he must inform his partner. If the company needs to place a larger order, it turns directly to its best supplier. The relationship must remain healthy, with no constraints or dependencies.

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Reducing overall costs

The purchasing function also serves to manage your invoices. The purchasing department not only seeks to reduce costs, but also to distribute expenditure more evenly. If your company has many sites or subsidiaries, you certainly need a large volume of orders. By aggregating them, you can make considerable savings, as you have negotiating leverage with your supplier.

However, to avoid incurring additional costs, the purchasing department must coordinate and monitor this pooling. Furthermore, depending on the quantity ordered, the purchasing department can go beyond a simple company/supplier relationship. It can reduce purchasing costs by establishing a policy of partnership or co-development. In fact, this is the best way to improve overall costs. In fact, the buyer must master the cost structure as well as the company’s knowledge.

A sound purchasing policy is important for good cash management, which can make or break a company. Poor purchasing management can lead to overall dysfunction in the company’s organization. Even the smallest disruption can lead to a loss of revenue.

Sustainable development

Sustainable development and responsible purchasing policies are also among the causes that are driving general management to implement a sound strategy. Indeed, the implementation of corporate social and environmental responsibility (CSR) is a key issue today. Its public image is at stake. The areas of application of sustainable development in purchasing are highly specific.

The purchasing department must ensure that its suppliers and stakeholders are committed to producing or delivering environmentally-friendly products. Through a sound analysis of costs and suppliers, it also objectively validates their practices. Evaluation grids are specified and integrated into purchasing procedures. As a result, suppliers who do not meet these criteria are not selected as part of the company’s purchasing policy.

To get the best results from your purchasing policy, it’s best to use management software to track your performance indicators. With Weproc, make your purchasing management process more reliable and fine-tune your strategy in line with your development policy.

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Want to learn more about our procurement management software Weproc? Contact us or request your free 15-minutes demo below!


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